Financial Crime World

Drug Crime Proceeds Concealment: Japanese Law Cracks Down on Money Laundering

Japan has strengthened its laws to combat the financing of drug crime and terrorism by cracking down on money laundering and terrorist financing. The country’s Act on Punishment of Financing to Offences (TF Act) criminalizes the collection and provision of terrorist funds, while the Terrorist Asset Freezing Act (TAFA) regulates domestic transactions by international terrorists.

Risk-Based Approach

The National Public Safety Commission prepares a comprehensive risk assessment report that assesses money laundering and terrorist financing risks for each category of transactions. Financial institutions (FIs), designated non-financial businesses and professions (DNFBPs), and non-profit organizations (NPOs) are identified as high-risk sectors.

  • FIs, DNFBPs, and NPOs are required to implement robust customer due diligence measures to prevent money laundering and terrorist financing.
  • High-risk transactions are subject to additional scrutiny and reporting requirements.

Beneficial Ownership Transparency

To prevent the misuse of legal persons, Japan has implemented measures to increase transparency around beneficial ownership. FIs and other specified business operators must verify information about beneficial owners at the time of transactions. Notaries also verify Beneficial Owners’ information when certifying articles of incorporation for founding legal persons.

  • The verification process includes checking the identity of beneficial owners and their relationship with the legal person.
  • FIs are required to maintain accurate records of beneficial ownership information.

Utilization of Financial Intelligence Unit

The Japan Financial Intelligence Center (JAFIC) serves as a national center for receiving and analyzing suspicious transaction reports, disseminating analysis results to law enforcement agencies, and supporting the government’s anti-money laundering and combating the financing of terrorism measures.

  • JAFIC receives and analyzes suspicious transaction reports from FIs and other stakeholders.
  • The center provides intelligence to law enforcement agencies to facilitate investigations and prosecutions.

Enforcement and Asset Freezing

To combat money laundering and terrorist financing, Japanese authorities have implemented strict measures, including investigation, prosecution, and asset freezing. The country has also signed agreements with over 100 foreign countries to exchange information on AML/CFT measures.

  • Investigation: Authorities conduct thorough investigations into suspected cases of money laundering and terrorist financing.
  • Prosecution: Those found guilty are prosecuted and punished accordingly.
  • Asset Freezing: Assets related to criminal activities are frozen to prevent their use or flow to terrorist organizations.

Conclusion

Japan’s strategy to combat money laundering and terrorist financing is a critical step towards making the country one of the safest in the world. By implementing robust measures, including a risk-based approach, beneficial ownership transparency, and utilization of financial intelligence units, Japan can effectively deprive drug crime proceeds of their criminal use and prevent funds from being used for or flowing to terrorist organizations.